ECON 3039
Labor Economics2015-16
By Elliott FanEconomics, NTU
Elliott Fan: Labor 2015 Fall Lecture 11 1
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DD Example: Kan and Lin (2011)
Elliott Fan: Labor 2015 Fall Lecture 11
• “The Effects of Employment Protection on Labor Turnover: Empirical Evidence from Taiwan,” Economic Inquiry, 49, 398–433.
• The paper explored the effect on labor turnovers of the introduction of Labor Standards Law, which has substantially increased the costs of firing.
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DD Example: Kan and Lin (2011)
Elliott Fan: Labor 2015 Fall Lecture 11
• Taiwan’s LSL attempts to regulate all aspects of employment relationship, for example, labor contract, wage, overtime payments and hours, retirement and severance payments, compensations for occupational accidents, and maternity benefits.
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DD Example: Kan and Lin (2011)
Elliott Fan: Labor 2015 Fall Lecture 11
Some of the LSL labor protection measures were new, for example, the prohibition of firing at will. • Firstly, employers have to give an advance notice before
dismissing an employee. • Secondly, LSL imposes a higher severance pay than
previous labor laws. • An employer can dismiss an employee only if the
business is closing down, suspended for more than 1 month, suffering from a loss, or when the employee is not able to perform the duties satisfactorily or violates the work rule.
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DD Example: Kan and Lin (2011)
Elliott Fan: Labor 2015 Fall Lecture 11
Enforcement
• The poor enforcement of LSL has also contributed to the low compliance rate of LSL in the early years of its implementations.
• During the first 3 years of LSL’s enactment the Department of Labor of the Ministry of Interior was in charge of the enforcement of LSL. However, inspection and prosecution were carried out by a multitude of local labor agencies belonging to the Taiwan Provincial Government, the Taipei and Kaohsiung municipalities, and the Ministry of Economic Affairs.
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DD Example: Kan and Lin (2011)
Elliott Fan: Labor 2015 Fall Lecture 11
• The industries covered by LSL include: (a) agriculture, forestry, fishing, and animal husbandry; (b) mining and quarrying; (c) manufacturing; (d) electricity, gas, and water; (e) construction; (f) transportation, storage, and communication; and (g) mass media.
• The industries not covered by LSL belong to the service sector: (a) retail and wholesale; (b) hotels and restaurants; (c) commerce; (d) finance, insurance and real estate; (e) business services; (f) social, personal, and related community services; and (g) public administration.
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DD Example: Kan and Lin (2011)
Elliott Fan: Labor 2015 Fall Lecture 11
Definitions:
Rate of hiring:
HRATEit = (HIREit /EMPit−1) × 100
Rate of separating:
SRATEit = (SEPARATEit /EMPit−1) × 100Worker flow:
WFLOWit = (HIREit + SEPARATEit /EMPit−1) × 100Job reallocation rate:
JREALLOCit = (| EMPit − EMPit−1|/EMPit−1) ×100,= (| JCit − JDit |/EMPit−1) × 100,
= (| HIREit − SEPARATEit |/EMPit−1)×100
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DD Example: Kan and Lin (2011)
Elliott Fan: Labor 2015 Fall Lecture 11
Difference-in-difference
• First layer: time (three timings)
• Second layer: being covered by LSL